This is the second time in a decade that the S&P Dow Jones Indices announced a major shake-up for the Dow Jones Industrial Average. The three companies leaving include Exxon Mobil, drug company Pfizer, and airplane and defense contractor Raytheon Technologies.
They are being replaced on the 30-stock indices by Salesforce (CRM), Amgen (AMGN) and Honeywell. This will balance out the disruption from Apple’s 4-to-1 stock split, which takes effect next Monday, according to Market Watch.
The Dow Jones is a stock-price-weighed index. This means it is based on share value and not on the shares market value like some other indexes. Salesforce was added to ensure the tech industry was properly represented, reports CNN Business.
With Exxon off the indices, after being one of the world’s most valuable companies at one time, there will be only one petroleum company left – Chevron. Exxon, which has been on the Dow since 1928, has seen shares plunge almost 40 percent this past year because of pressure from crude oil prices.
“The announced changes help offset that reduction,” S&P Dow Jones said in a statement. “They also help diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy.”
However, tech companies, like Amazon and Google parent Alphabet have rallied. Apple joined the Dow back in 2015 not long after a stock split, and earlier this month, the tech giant’s market value topped $2 trillion, making it the first U.S. company to reach that milestone, according to CBS News.
“From 1980, there have been three 4-for-1 stock splits in the Dow: Visa V, 0.67% in March 2015, Walt Disney DIS, -0.19% in May 1992, and Philip Morris in October 1989,” S&P Dow Jones Indices Senior Index Analyst Howard Silverblatt noted in an email.
